August 19, 2022

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The Activision-Blizzard shareholders’ response to a whirlwind of news over the past year—which include disturbing, company-wide allegations of sexual harassment and pay disparity, followed by a $68.7 billion acquisition proposal—reached a new head at the end of April in the form of a sweeping lawsuit.

As first reported by Axios on Wednesday, the April 26 civil suit, as filed by the New York City Employees’ Retirement System and other NYC retirement and pension systems, hinges upon allegations that Activision-Blizzard has failed to properly open its books. Its plaintiffs, which include longstanding Activision-Blizzard shareholders, contend in Delaware court that fuller disclosure from Activision-Blizzard is required to answer their allegations about “breaches of fiduciary duty.”

“Escape liability and accountability”

Those include the shareholders’ belief that executives acted in their own interests, as opposed to those of company shareholders, in failing for years to inform them about the original California state lawsuit’s allegations. The suit also alleges that the board is accelerating efforts to complete a proposed merger with Microsoft to “extinguish highly valuable derivative claims” against all Activision-Blizzard board members and longtime company CEO Bobby Kotick.

“With the announced merger, Kotick will be able to escape liability and accountability entirely,” the lawsuit states, and it calls Kotick’s presence in the merger’s negotiations “inexcusable” as a result.

The lawsuit focuses on the Section 220 provision of the Delaware General Corporation Law, which allows stockholders to demand that corporations under legal review provide documents relating to allegations of wrongdoing. According to the suit, the plaintiffs’ original Section 220 demand, filed in October 2021, resulted in the turnover of “107 documents” relating to the Activision-Blizzard board’s activities. The plaintiffs allege that these documents are insufficient in light of what Section 220 demands—and that its follow-up request for more documentation, filed in early April, was met with a tardy response, thus violating Delaware law.

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Ultimately, the late-April lawsuit primarily requests this data, along with damage values related to the time and effort required to request it. But the data in question sets the stage for further legal action by the named shareholders, who are not the first to go after Activision-Blizzard with similar allegations.

The April lawsuit’s language doubles down on wanting to confirm a failure by Activision-Blizzard and its board to properly negotiate a per-share acquisition value based on the company’s stock price before the California lawsuit became public knowledge. Its list of outstanding data demands is lengthy, and it seeks more details about five other “potential transactions” that could have led to more highly valued acquisition offers.

The information about company meetings and correspondence, and about what Kotick and the rest of the Activision-Blizzard board knew before and during the California state investigation, could be interpreted as a breach of fiduciary duty and lead to an additional lawsuit. And the most recent lawsuit only adds to the mountain of legal scrutiny and activity surrounding Activision-Blizzard, which has recently included a resignation-in-protest by a California state lawyer and a majority shareholder vote in favor of the Microsoft acquisition.